April 2021

Tech-driven audit approach: What you need to know

June 10, 2021April 23, 2021 by John Colthart

Deciding on the best audit approach isn’t a cookie-cutter process. While a long-standing relationship with a client or in-depth industry knowledge can give auditors a leg up, defining an effective audit approach requires careful consideration and planning for every engagement.

After all, your audit teams understand that every client is unique. So, deciding on the best ways to approach an audit will be too. Everything from the client’s objectives and business operations to known or unknown risks, internal controls, and much more will determine how you and your team go about any particular audit.

However, there’s something else you may need to think about that often goes unmentioned: the role of technology in your audit approach.

As this pandemic continues to propel widespread digital transformation and standards evolve to embrace new technologies, there is a growing need for auditors to consider updating their audit methodology too.

After all, a tech-driven audit approach can not only help auditors work more efficiently, but it may also allow them to deliver greater value to their clients. Whether it’s AI auditing software or other financial automation tools, technology serves to complement traditional auditing processes and lays a foundation for even better financial insights over time.

How does a tech-driven audit approach differ from a traditional audit?

A tech-driven audit approach considers the use of technology right from the get-go. It means there’s already some level of buy-in from management about auditing technologies, so your people are trained on the tech you’re using. You might even have data handling processes set up to fully leverage the capabilities of the new auditing solution.

While reaching this level of technological adoption might seem overwhelming, it shouldn’t have to be. With a little support on your side from the right vendor and a solid change management plan, you’ll be able to easily trial new technologies and reach higher levels of adoption at your own pace.

Then, as you go into new audit engagements over time, it’ll become second nature for you to think about the role of technology, how it will complement your existing methodologies, and how it may support your resources. From the planning stages right through to completion, you’ll consider how to automate manual tasks, get extra validation and assertion, and perhaps even uncover new insights that are buried in the mounds of client financial data.

In other words, implementing a tech-driven audit approach means you’re thinking ahead about how to best use the technology to deliver a quality audit. And you’re identifying the specific procedures or tasks where the auditing technology will be most beneficial.

What are the key factors to consider in a tech-driven audit approach?

Defining a tech-driven audit approach isn’t entirely different than a traditional one. It just requires another layer of consideration about how the technology fits into your methodologies. Below, we’ll explore what a tech-driven audit approach might look like and the areas where technological considerations can be made.

Understanding the client’s business and objectives

Whether you use technology in your audit or not, getting to know your client is a given. You’ll need to consider the industry they’re in, their business operations, their audit objectives, and other unique factors that pertain to the organization to achieve an effective assessment.

When defining objectives, it’s also important to consider those beyond the financial statement audits too. In fact, in a recent Deloitte report, 95% of the 351 c-suite, finance, and audit committee executives polled said that audits should provide additional value beyond an independent report on the historical financial information. Essentially, clients are looking for deeper insights, analysis, and recommendations.

When you implement a tech-driven audit approach, your audit team will be able to automate manual tasks and work more efficiently. That’ll allow you to assign extra resources to added-value services such as helping your client uncover new insights. Using technology, you’re essentially able to broaden your service offering and point your clients towards new opportunities that will positively impact their business.

At this stage, you’ll also need to understand what financial software your client is using and how you’re going to best access the information you need. With all this in mind, here are a few questions to ponder to map out your tech-driven audit:

How will the technology you’re using offer your clients more insights and value beyond the initial scope of objectives?
Can your auditing technology support remote audits? Does the technology you have enable easy access to the financial statements and information?
Does the technology ensure full ownership over the data and keep your client’s financial information secure?

Conducting the preliminary risk assessments

Identifying risks of material misstatement and their relative significance is an integral part of defining your audit approach. Because when you have a good understanding of the potential risks at play, you’re better able to plan for and execute a comprehensive and high-quality audit.

At this stage, auditors will look over balance sheets and income statements to spot any obvious inconsistencies. They might also dive into subledger data and run some preliminary testing on journal entries. The challenge here is that a traditional audit approach will leave so much data untouched and unexamined.

In a tech-driven audit approach, this is a key area where your audit technology can really make a difference. For instance, if you’re using an AI auditing platform, you’ll be able to test 100% of your client’s financial data and dive into accounts receivable and accounts payables subledgers to see if any other anomalies stand out. This allows your team to conduct a deeper level of preliminary risk analysis and potentially uncover risks that weren’t on your radar.

Consider the following on risks assessment when building a tech-driven audit:

How can you use your auditing technology to get a clearer picture of the financial risks?
Does your technology allow you to filter results and dive into your client’s financial data to get a better understanding of those risks?
If you save time by automating risk assessment procedures, where else can you apply resources to offer your clients more value?

Evaluating the company’s internal controls

Evaluating the effectiveness of the company’s internal control over financial reporting is another critical component in your audit. Your auditors will likely perform a series of tests to validate how well internal controls are being upheld within the company.

In a tech-driven audit approach, the technology can either complement or replicate manual testing procedures to achieve higher levels of assurance. The technology might also point your team to riskier data that will then open up new conversations with your clients about potential weaknesses in internal controls.

For example, our AI auditing software automatically identifies control points to spot high-risk transaction data. The auditing team can also adjust these control points and use other capabilities within the platform to recreate traditional control testing models.

All of this will allow your team to move forward with greater confidence in the audit engagement while ensuring high levels of accuracy and diligence. Here’s more to think about:

Does your technology complement internal control testing or replicate manual processes?
What control testing models can you effectively carry out using your technology?
Can you adapt control points and testing to different clients and industries?

Building the plan for the audit engagement

Putting together the audit plan outlines why, how, and when you’re going to execute the audit procedures. These include everything from the planned nature, timing, and extent of risk assessment procedures, controls tests, substantive procedures, and any other relevant audit tasks.

When putting together the audit plan, an auditor will usually provide examples and reports that justify why certain procedures will be critical for the audit. In a tech-driven audit, it’s important to consider how your technology can back up your findings and assessments and help you build a more complete plan.

This could include exporting powerful visual graphs and data that support your audit plan and substantiate the details of specific procedures. Ultimately, this gives the client a snapshot view of where the auditors have identified risks and why certain procedures are warranted.

Here are some tech-focused questions to consider when creating your audit plan:

Does your technology allow you to easily export information to build a better audit plan?
Can you customize graphs or visuals to support the findings of your preliminary risk assessment?
Can you easily share information with your client to help steer conversations about the audit plan or other potential opportunities?

Are you ready to embrace a tech-driven audit approach?

The role of technology in audits is growing every day. More auditors are not only embracing new tools such as AI auditing software to support their audit strategies, but industry standards are also evolving to accommodate higher levels of automation in audit practices. Even the AICPA has announced the ‘Dynamic Audit Solution Initiative’, promising to create a new, innovative process for auditing using technology.

Auditors who stick with the traditional audit approach for fear of change are going to be left behind.

If you’re ready to implement a tech-driven audit approach using AI auditing software, know that the partner you choose can make all the difference. At MindBridge, we support our clients through the technology adoption process and offer value-add services that help you reach company-wide success.

Want to hear about what it’s like transitioning to a tech-driven audit approach? Read how Dixon Hughes Goodman LLP (DHG) embraces the power of AI to move their auditing practices forward.

Change management: What is it, and why is it important?

April 5, 2023April 9, 2021 by Jennifer MacIntosh

Change is scary. But with a little risk, a lot of planning, and some extra effort comes an opportunity for growth and reward. That’s what makes change management so important.

As a manager, department head, or executive how do you know when it’s time for change? How do you invoke change within an organization, and how do you get others on board?

Studies in what’s known as change management have shown that there is no one single answer to what most influences and leads to successful transformation initiatives.

In recent years, change management strategies have focused on soft factors like culture, leadership, and motivation. Each of these play a key role in a successful transition. But, for change to truly take hold, it’s also important to focus on the hard factors like duration, integrity, commitment, and effort.

In this article, we’ll discuss the definition of change management, address corporate responsibility during the process, what you and your team need to do to be successful, and show you the best ways to implement transition skills and best practices into your organization and projects.

What is change management?

Change management is a big, daunting term, let alone task. It’s a rather condensed way of explaining the process when an organization takes on projects or initiatives to improve performance, address key issues, and seize new opportunities. These endeavors may require companies to shift their methodologies, roles, organizational structures, and perhaps even the types of and uses for technology.

Successful transitions dependent upon four core principles. These principles are important to understand before undertaking a large shift in processes or anything else, no matter what the context:

Understanding change – Understand the questions that need to be asked, the why, and the “ins and outs” of the change.
Planning change – This looks different for every organization, but can include achieving high-level sponsorship, identifying stakeholder involvement, and motivational techniques and establishing a team responsible for managing the change.
Implementing change – Roll out the change, ensure everyone has been trained on the new process, technology, etc, knows what their role is and the importance they play in affecting change.
Communicating change – Tools to help everyone understand why the change is happening, the positive effects that will come and the steps to required to ensure success.

Now, that’s just a brief overview. Here’s an in-depth review of these four principles, and how each of them help you work toward successfully-managed change in your organization.

Understanding change management, implementing best practices

Understanding change management begins by understanding its three important levels.

According to Prosci, a change management solution, the three levels are:

Individual
Organizational
Enterprise

In this model, enterprise change management is therefore dependent on both successful individual change management and organizational change management. Each of these aspects build onto one another to enact lasting, ingrained change across your department, team, or organization.

Individual change management – This will require tapping into the mind of your employees. It requires understanding how people experience change and what they need to handle it successfully, and thrive post-implementation.

ADKAR is a great acronym created by Prosci founder Jeff Hiatt that represents the five tangible and concrete outcomes required for individual staff.

The acronym stands for:

For success at the individual level of change management, companies need to be able to communicate these five ADKAR elements to their employees in order for them to understand why the necessity of the change, where the change is coming from, how they can support the change, and how they will be impacted from it and the benefits the change represents.

Organizational change management – These are the steps and actions taken at a project level to support the individuals impacted by the ongoing change process. It starts by identifying the groups or people who will need to change, and in what ways. Once identified, successful organizational change management requires a customized plan for each individual to ensure that they receive the awareness, leadership, and training they need to be successful going forward.

Individual employees are at the center of successful change management processes; their success or failure will determine the success or failure of the processes that are changing organizationally.

Enterprise change management – This is the ‘final’ level of change management and essentially means that effective change management is embedded into your organization’s roles, structures, processes and leadership competencies. When it comes to enterprise change management, newly-implemented processes are consistently applied to initiatives, leaders will have the skills to guide their teams through the change, and staff will know what to ask for to be successful.

When embedded into your structure, enterprise change management capability means that individuals embrace change more effectively, and the organization itself is able to respond faster to market changes, embrace strategic initiatives, and adopt new technology much more rapidly.

Now that we’ve established the benefits and principles of managing change, how does it work, exactly?

Learn more about how MindBridge can help you sample less, and discover more.

How does change management work?

Change management relies on cohesive effort between management and employees to lead a successful transition. If leadership is not able to create a solid plan, and if employees are unable to “embrace and learn a new way of working, the initiative will fail.”

Take transitioning financial technologies and processes, for example. As technology improves and data sets increase, financial professionals and their departments are feeling the pressure to do more in less time. The trouble comes when the quality of work suffers as a result of the attempt to marry efficiency with quality. This is especially true of risk management and discovery.

Platforms like MindBridge help organizations discover the known and unknown risk in their financial data sets. They can analyze 100% of transactions, provide insights to better communicate analysis with stakeholders, and ultimately produce higher quality work in a fraction of the time.

But, all of this requires a solid, well-executed change management plan. While new technologies are increasingly turnkey, unlocking their full potential takes buy-in at all levels of an organization, and investment in the principles of change.

At MindBridge, we strive to enable our customers with the tools, resources, and support they need to successfully transition their financial processes. But, for the organizations themselves, there is still work to do.

When it comes to changing any process or technology, the status quo is always simpler. But, those who are truly committed to growth and the future of their organizations aren’t content with the easy way out.

By integrating proper change management in the deployment process, companies and departments will be able to get employees on board and involved in the process to ensure as smooth a transition as possible. There will be headaches, and you may be uncomfortable. But that’s how change management works. If it were easy, everyone would be successful.

How to plan for transition

To help plan for the transition process, Harvard Business Review discusses the hard factors that need to be discussed more (along with soft factors like culture, leadership and motivation) when implementing change management strategies. These factors allow companies to measure, communicate and influence elements quickly to affect transformation. Before they start, companies need to understand the time allotted to complete the change, the number of people required to execute it, and the financial results that intended actions are expected to achieve.

To help lead a successful change management operation, there are four specific factors companies can use to determine the outcome and create a path to success:

Duration – The length of time it will take until the change program is complete, and the length of time between reviews built to measure success

Integrity – The ability to select the best staff to lead the program. Look for problem solving skills, results & methodological oriented individuals

Commitment – The level of enthusiasm and resilence from both management and employees to affect this change

Effort – Calculate the amount of time and effort beyond existing responsibilities, resources that are over stretched may compromise the change program or normal operations.

For future transitions

Change management requires focus, organization, and motivation. Not everyone will be willing to accept and help to invoke this change at the same time. The source of resistance is often individuals or groups, but it can also be systems or processes that are outdated or that fail to fit current business conditions.

Ways to mitigate these obstacles include rewarding flexibility, creating role models for change and repeating the key messages and goals of the project throughout the entire change program.

This is where the message of the “bigger picture” becomes crucial, if employees feel separated from the goals they will question their motivations. But by showing the concrete benefits of change for them, their department, and the organization more largely, you can demonstrate how all this added effort will lead to gains in the future.

For more on creating an effective transition strategy, watch our webinar, Change management 101: Strategies for leading change when adopting AI.

For more articles and resources like this one, visit our blog.

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